The dollar has come under fresh downward pressure against all other major currencies.

With much of the recent value increase running out of steam, the dollar fell below 130 yen early last week and is now hovering around 127 yen.

The dollar’s weak showing mirrors eroding confidence in the greenback, for which there are good reasons.

For one thing, the U.S. current-account deficit has increased again, augmenting downward pressure on the dollar. For another, doubts remain over whether Washington will remain committed to a strong dollar policy amid reports that U.S. manufacturers are blaming their profit falls on what they claim is the dollar’s excessive appreciation against other currencies.

Undeniably, a strong dollar erodes U.S. manufacturers’ competitiveness on the world market, and the U.S. Federal Reserve, too, has not disguised its worries about the dollar’s rise against other currencies.

The falling confidence in the dollar is also due to doubts about Washington’s ability to halt the Israeli military campaign in the West Bank.

Fears of further New York stock price falls have also weighed on the dollar’s value against other currencies.

Against this backdrop, there was talk that the euro’s weakness against the dollar came up for discussion at the April 19-20 meeting of finance ministers and central bank governors from the Group of Seven industrial countries.

There are indications that European and Mideast investors in particular have begun switching away from dollar-based investment vehicles and into other assets.

Yet, a particularly steep dollar fall seems unlikely.

The United States cannot drop it’s strong-dollar policy if it intends to keep attracting the foreign capital needed to finance its bloated current-account deficit. Also, when it comes to economic fundamentals, a great many other countries are not in as good shape as the U.S.

In Japan, the economy has finally begun to show some encouraging signs, but worries remain over recent developments on the domestic political front and the future of Prime Minister Junichiro Koizumi’s Cabinet.

The dollar appears likely to move between 127 yen and 130 yen in the near term.

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